If your credit score is below 700 here are 5 things to refrain from to get it to where it should be. There are people who believe the whole credit bureau system is a scam. However, the hard truth is your credit score is a reliable source from employers, lenders, housing, and creditors to determine the likelihood that a certain individual will pay what is owed, and on time.
To understand how to build credit, first there needs to be an understanding of what hurts your credit.
THINGS TO AVOID:
- Don’t let credit card companies lull you into financial disaster.
It’s obvious and not at the same time, credit cards allow someone to spend money and pay it off in one chunk later. Credit cards are great because of all the perks they offer, but are not so great because if you carry a balance there is high interest rates.
HERE IS THE TAKE AWAY: The credit used this month is due at the end of the following month.
A Major problem you should be aware of it a lot of people don’t look two months ahead in the future, that is 4 paychecks away and that is how credit card companies get people to carry a balance.
- (a)Don’t miss a payment. At least make the minimum
If you don’t have enough money to pay the entire bill, at least make the minimum payment. Missing a payment can significantly lower your credit score.
(b) Don’t miss a payment
“What if I accidentally missed a payment?” – We are human and sometimes we forget, or maybe don’t have enough cash on that specific payment date. Credit card company’s usually report missed payments to the credit bureau a few days to a month after the date. So…
HERE IS THE TAKEAWAY: Call the credit card company and offer to make a payment and ask them to not report the missed payment. It’s worth a shot and it has worked for me in the past.
- Never Cancel a Credit card.
There is great benefit to keeping a credit card open. First, you have access to more credit which can create a better credit utilization percentage (see article If your credit score is above 700) and it increases your length of credit history. If you cancel the card you loose both of these and your credit will drop. “But what if there Is an annual fee?”
HERE IS THE TAKEAWAY: Call the credit card company and ask to convert your annual fee card to a lower non-annual fee card. YES YOU CAN DO THIS, and it doesn’t hurt your credit!
- Avoid hard pulls on your credit
A hard pull happens when a company asks your permission to make an inquiry on your credit. This hurts it, albeit not as much as a missed payment.
HERE IS THE TAKEAWAY: Be frugal with allowing company’s to do hard inquires. Know when it’s a hard inquiry: opening a credit card(even a store credit card); getting a loan; getting financing (even for a car); in general the transaction doesn’t even need to go through in order for it to hurt your credit.
- In general, don’t use more credit than you have cash to pay it off.
“I need everything I buy with my credit card,” usually is a lie to oneself. The cold-hard truth might be that you are not in the class you believe yourself to be. Actually go through your statements and see how many times you went out to eat, got a coffee, beer, cigarettes, stressed shopped, or bought a new phone.
HERE IS THE TAKEAWAY: If you have continuing credit card debt, then maybe you can’t afford the extras. This is “in general” meaning that there may be other things keeping you in credit card debt, such as medical expenses. If so look at the other articles on greenbackway dealing with alternatives to unsecure debt.
In conclusion, these tips are part of the basics to building a credit score up. While it is not everything you can do to get a high credit score, it is a starting point. If you need a little motivation read , How To Use Your Credit Score To Make You Money.
